Update: S3E3 "Walk of Punishment" contains a scene between Melisandre and Stannis that elucidates a key physical constraint to shadow baby, which I had mentioned in #2 below.
Before the current season of Game of Thrones began, David Chen and Joanna Robinson of the A Cast of Kings podcast took a look back at season two's storylines. One of the developments they revisit was the introduction of the shadow baby, which many viewers saw as either unwelcome genre-shifting (as my friend Elliot espoused in our podcast) or, in David Chen's case, as incomplete and/or illogical world-building. In David's view, the show gave him no sense of any rules governing shadow baby, and he didn't see any reason why Stannis couldn't or shouldn't use it immediately to kill every high value target in Westeros and easily take the Iron Throne. Both of these views don't hold much water when you get over the jarring weirdness of the shadow baby and look at the facts of the world more dispassionately, however.

As for the shadow baby representing a shift in balance from pseudo-medieval historical fiction to fantasy, remember that the very first scene in the show involves both reanimated corpses, i.e. wights, and another race of otherworldly beings identified as White Walkers. The last scene of the season involves a woman not only surviving a raging conflagration but also emerging from the ashes accompanied by dragon triplets (which for my money should've been named Shadrach, Meshach, and Abednego). While the shadow baby seems more overtly mystical to some people, its conception is just as grounded in the physical world as anything else, as I'll outline below. Given these two seminal season one bookmarks and other events in between, shadow baby doesn't represent a departure in realness.

David's criticism about a lack of rules is less understandable to me, especially given that he has watched each episode at least twice. Really his concern isn't about a lack of rules per se, but that the show presented a weapon and provided no limits to its power, which in turn weakens the show's dramatic tension. Here's a refresher of the relevant events (note this is TV only); see if any limits or rules regarding the shadow baby jump out at you:

S2E2 "The Night Lands"

Melisandre sees Stannis fretting over his situation map, and tells him she sees how to defeat Renly. But to do that, he must give "all of himself" to the Lord of Light. She promises him a son, and and their lovemaking scatters the war pieces in fiery symbolism.

S2E4 "Garden of Bones"

Melisandre: "Look to your sins Lord Renly; the night is dark and full of terrors."

Stannis calls on Davos to row the 'Red Woman' ashore: "No one must know what you do, and we'll never speak of this again." Davos says there must be 'cleaner' ways; Stannis replies, "None that win wars."

Davos rows Melisandre ashore in the cover of night. She says things like "a man is good or he is evil" and "shadows...are the servants of light; the children of fire." No doubt this is idle rowboat chatter, however.

Melisandra reveals her swollen belly and births a shadowy creature as the flames flare in Davos' lantern.

S2E5 "The Ghost of Harrenhal"

Later that night, the shadow creature appears in Renly's tent, stabs Renly through the heart, and disappears, having ignored everyone else. The creature also displays a pate with a distinctive sheen.

Davos confronts Stannis the next day and says, "Nothing is worth what this will cost you, not even the Iron Throne." Changing tack, Davos councils Stannis that his men are uneasy with Melisandre's foreign religion and that she should not be a part of the attack on King's Landing. Stannis acquiesces to this advice.

When reading over that list, are you left with the sense that the use of Shadow Baby to start killing people wholesale is desirable, let alone possible? Several constraints appear to me:

Religious constraints: Shadow baby doesn't touch anyone else in the encampment and seems to die like a honeybee after delivering its sting. That and Melisandre's comments to Renly, Davos, and Stannis imply that shadow baby is a single-purpose weapon against specific, 'sinful' people.

Physical constraints: The shadow baby is the process of copulation, gestation, and birth. It seems there's at least a few days in turn-around for shadow baby production and if anything the show presents it as something that can't happen regularly Consider also that the 'baby' is in fact a shadowy version of a full-grown Stannis, not some amorphous blob like its TV forebear the smoke monster, implying it's more a part of Stannis than merely his progeny.

Environmental constraints: Melisandre is rowed ashore at night (which is full of terrors). Any one of the following could be inferred: shadow baby can't travel during daylight; shadow baby can't travel across long distances; shadow baby can't travel across water.

Cultural/karmic constraints: Even if you want to dismiss the first three as speculative, this one is explicit and thematically important: over and over Stannis' use of the the Shadow Baby is presented as a dirty tactic that will lose him respect from his men and perhaps even bring retribution from the gods Stannis has forsaken; even if we don't know what form these costs will take, Davos explicitly says they will outweigh the benefits.

It would be hard for a repeat watcher like David to miss Davos' warnings, so I suspect he's dismissing them as unimportant because they're not binding. This misses both the reality of soft constraints in the real world, but more importantly, it misses one of the key ideas about power the show puts forth. According to Varys, "Power resides where men believe it resides. It's a trick--a shadow on the wall." In the world of Game of Thrones, power isn't measured by the size of your army or your purse, but how everyone else perceives you. That's what puts shadow baby in a corner.